On July 11, 2024, Northern Technologies International Corp (NTIC, Financial) released its 8-K filing reporting financial results for the third quarter of fiscal 2024. The company, a developer and marketer of environmentally beneficial products and services, operates primarily through its ZERUST and Nature-Tec segments.
Company Overview
Northern Technologies International Corp (NTIC, Financial) is a U.S.-based firm specializing in corrosion prevention solutions under the ZERUST brand and bio-based, biodegradable polymer resin compounds under the Nature-Tec brand. The ZERUST segment generates the majority of the company's revenue.
Performance and Challenges
For the third quarter of fiscal 2024, NTIC reported consolidated net sales of $20.69 million, a 1.4% decrease from the same period last year. This decline was primarily driven by a 4.4% decrease in ZERUST industrial net sales and a significant 31.9% drop in ZERUST oil and gas net sales. The latter was affected by the timing of approximately $600,000 in orders shifting to the fourth quarter.
Despite these challenges, NTIC saw a 20.1% increase in Natur-Tec product net sales, reaching a quarterly record of $5.85 million. NTIC China also reported a 6.7% increase in net sales.
Financial Achievements
NTIC's gross profit margin improved by 210 basis points to 38.2%, reflecting the company's efforts to mitigate supply chain disruptions and raw material challenges. Cash provided by operating activities surged 116% to $7.58 million for the nine months ended May 31, 2024, compared to $3.51 million for the same period last fiscal year.
Income Statement Highlights
| Three Months Ended | May 31, 2024 | % of Net Sales | May 31, 2023 | % of Net Sales | % Change |
|---|---|---|---|---|---|
| ZERUST industrial net sales | $13,477,181 | 65.1% | $14,103,292 | 67.3% | (4.4%) |
| ZERUST oil & gas net sales | $1,360,054 | 6.6% | $1,997,382 | 9.5% | (31.9%) |
| Total ZERUST net sales | $14,837,235 | 71.7% | $16,100,674 | 76.8% | (7.8%) |
| Total Natur-Tec net sales | $5,848,962 | 28.3% | $4,869,052 | 23.2% | 20.1% |
| Total net sales | $20,686,197 | 100.0% | $20,969,726 | 100.0% | (1.4%) |
Balance Sheet and Cash Flow
NTIC's balance sheet remains robust with $23.18 million in working capital as of May 31, 2024, including $5.80 million in cash and cash equivalents. The company also reported a decrease in its outstanding revolving line of credit and term loan balance to $4.75 million.
Commentary
"Our third quarter results reflect the progress we are making navigating a fluid macro environment, while capitalizing on growing demand within our Natur-Tec® and ZERUST® oil and gas markets," said G. Patrick Lynch, President and CEO of NTIC.
Analysis
While NTIC's third-quarter performance fell short of analyst estimates, the company demonstrated resilience through strategic investments and operational adjustments. The significant growth in Natur-Tec sales and improved gross profit margins are positive indicators for future performance. However, the decline in ZERUST sales, particularly in the oil and gas segment, highlights the challenges NTIC faces in a volatile market environment.
For more detailed insights and to access the full earnings report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Northern Technologies International Corp for further details.
